Dealers claiming input tax credit must establish genuine transactions and physical movement of goods with adequate proof; failure to do so may result in disallowance and recovery proceedings under the Act.

JUDGMENT

Piyush Agrawal, J.

Heard Mr. Pradeep Kumar Srivastava for the petitioner and Mr. Rishi Kumar, learned Additional Chief Standing Counsel for the respondents.

2. The instant Writ Tax is being entertained by this Court in view of the fact that G.S.T. Tribunal is not functional in the State of Uttar Pradesh pursuant to the Gazette notification of the Central Government bearing number CG-DL-E-14092023-248743 dated 14.09.2023.

3. By means of this writ petition, the petitioner is assailing the order dated 4.10.2019 passed by the Commercial Tax Officer, Sector 2 Meerut by which the proceedings of Section 74 of UP GST Act was initiated demanding Rs. 12,32,148/- as wrong availment of input tax credit which was confirmed by the impugned order dated 6.3.2021 passed by Additional Commissioner, Grade - 2 (Appeal) First, Commercial Tax, Meerut.

4. Brief facts of the case as stated, are that the petitioner being a registered dealer having GSTIN No. 09ACLPU9404D1ZA is engaged in the purchase and sale of waste materials, plastic scrap, paper scrap and metal scrap. The petitioner from April 2018 to September 2019 has disclosed the turnover of Rs. 34,22,634/- on which input tax credit of Rs. 6,16,074.12/was availed. Thereafter a show cause notice was issued on 23.1.2019 under Section 74 of UP GST Act on the ground of wrong availment of input tax credit to which a reply was submitted by the petitioner. Being not satisfied with the reply of the petitioner, tax liability to the tune of Rs. 6,16,074/- along with penalty of Rs. 6,16,074/- total amount Rs. 12,32,148/- was demanded from the petitioner by the order dated 4.10.2019. Thereafter an appeal has been preferred which has been rejected by the impugned order dated 6.3.2021. Hence the present writ petition.

5. Learned counsel for the petitioner has submitted that petitioner has purchased the goods / scrap from various parties through tax invoices for which e-way bills were also generated. The said goods were transported through trucks along with bilties and payments were made through cheques or RTGS / NEFT. On the basis of selling dealer having not shown the said purchases in its return or not deposited tax, the action cannot be taken against the petitioner. He further submitted that if the selling dealer have not paid the tax / deposited the tax with the Government, the benefit of input tax credit cannot be denied to the petitioner.

6. It was argued that the benefit of tax credit in the G.S.T. regime is being brought with intention to avoid cascading effect and once the tax has been charged on the bill and paid by the petitioner through banking channel, the benefit of input tax credit cannot be denied, legally. He submitted that petitioner has rightly discharged its tax liability by paying the tax charged on the bills raised by the selling dealer and if the selling dealer have not deposited the tax so charged from the petitioner, the selling dealer shall be penalized and not the petitioner. It has been further argued by the petitioner that in the event the amount of input tax credit claimed by the petitioner is being recovered that would amount to double taxation, which is not the spirit of G.S.T. regime.

7. In support of his claim, learned counsel for the petitioner has relied upon the judgement of this Court in Ashish Trading Company v. State of UP, Writ (Tax No. 228 of 2021) 2023 (113) UPTC 6 and Calcutta High Court in M/s LGW I